Tax Services:

Passive Activity and At-Risk Loss Limitation Planning

When individuals, trusts and estates, closely held C corporations or personal service corporations are invested in pass-through entities such as partnerships, S corporations or Limited Liability Companies, it is their responsibility to determine the amount of loss they can claim. Losses can be limited due to basis rules, at-risk rules and passive activity loss rules. Complying with these rules and planning for losses is an area in which Sisterson has exceptional knowledge and experience.

Our tax professionals understand the complexities of today’s passive activity and at-risk loss limitation rules, including all of the following issues:

• Determination of proper grouping of activities
• Planning to maximize the deduction of losses from pass-through entities
• Planning to satisfy active participation and material participation tests
• Working interests in oil and gas property
• Related party transactions
• Determination of basis and at-risk tax basis (regular tax and AMT) in pass-through entities
• Planning to maximize the deduction of suspended losses upon disposition of passive activities
• Planning for limited partners vs. general partners
• Planning for “real estate professionals”
• Self-charged interest
• Publicly traded partnerships
• Abandonment or worthlessness of a partnership interest
• Passive activity credits
• Former passive activities
• Recapture of negative at-risk amount
• Effect of recourse, non-recourse and qualified non-recourse financing on at-risk amount
• Active business exception from at-risk rules for closely held C corporations